Using stock exchange charts to study investments in detail and also predict future market trends or assess current positions
Stock exchange charts are mainly used by technical analysts to study securities and predict the future movements of stock prices. Aside from this, these charts can also be used to represent stock price movements over a period of time, regardless of whether the information will be used to predict future market trends or merely to study the status of one's investments.
Types Of Stock Exchange Charts
There are several types of stock charts. The most popular among these is the bar chart. This type of chart can display large amounts of data and can provide more details compared with other charts. It can represent daily or weekly market data, depending on the need of the analyst. Bar charts require the high, low and close data to form the price plot.
One of the simpler types of stock chart is the line chart. This doesn't offer as much detail as the bar chart, but it has less clutter and is more useful to traders or investors who prefer a scaled-down representation of stock movements. Line charts are favored by traders and investors who are more focused on the closing level than other market data. These charts are also used when open, high and low data are not available.
Another type is the point and figure. This chart is based solely on price movement and does not represent time. Regardless of the level of price movement, the point and figure chart represents each day or week of trading as one point. Price Activity charts, on the other hand, represent the number of shares traded everyday. They keep tabs of the estimated volume data at each price level and represent them in color-code form.
Main Functions
Charts are used by technical analysts to identify trends in the stock market. The information they derive from these charts is then used to predict the future movement of prices to guide them in their investment decisions. In some of the biggest exchanges, like the Toronto Stock Exchange and the American Stock Exchange, technical analysis and stock charts are favored over fundamental analysis.
Despite traders' reliance on stock charts and technical analysis, some members of the academia consider the practice as plain guessing, arguing that one cannot predict the future movement of the market based on past data. In response, some analysts and stock traders argue that technical analysis is not so much as predicting future trends, but more on identifying opportunities that particular market data may present.
Stock exchange charts have been widely used by traders, analysts and investors despite some academicians' claim that they are unreliable. Whichever way the debate goes, there is no denying that chart analysis or technical analysis has already cemented its position as one of the better known tactics in studying the financial markets.
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